School district ponders budget shortfall

After multiple years of relying on reserves to balance its budgets, the Kenai Peninsula Borough School District’s administration told gathered Board of Education members Tuesday that the practice was not sustainable and the district needed to find a different solution to continued budgetary shortfalls.

According to the preliminary general fund budget data the district is projecting a more than $3.4 million budget deficit for the fiscal year 2015. District Superintendent Steve Atwater and Assistant Superintendent Dave Jones gave board members a broad overview of the district’s FY15 budget and gave several options for potential cuts in expenditures including closing the Skyview High School Pool — a projected savings of $180,000 — and reducing district level certified and support personnel — possibly saving $320,000.

None of the potential cuts were decided upon as necessary, and several board members said they were opposed to staff reductions. Jones and Atwater said they were looking for guidance from the board on how the administration should proceed when determining which things could be cut and to what level those cuts could be made.

“We’re facing a deficit that’s larger than what we’re used too and we’re at a point to where we’re going to make some recommendations for changes,” Atwater said.

Part of the discussion revolved around state funding and borough funding, the two primary sources of revenue for the school district. Atwater also asked that board members set a cap on how much money they would be willing to spend out of district savings in its unassigned fund balance.

“What is your targeted number that you want to use for this?” Atwater said. “Our thought is that you would not want to exceed $1 million, that you would set that as your maximum as a way to position yourself to continue to be in good shape for the coming years.”

The district has just over $6 million in unassigned fund balance currently, according to figures Jones provided, however continual use of savings to balance the budget would be ultimately unsustainable, both Atwater and Jones said.

If the borough and state fund the district at the same levels as FY14, the district will use more than half of that figure or about $3.4 million, according to district data.

Retirement and health care costs have also been rising, according to district data, especially in the public employees retirements system, PERS, and Alaska Teacher Retirement System, TRS, revenue and expenditures.

The two retirement systems are basically an “unfunded liability” of the state which amounts to almost $12 billion in retirement costs to the state that have yet to be met.

Each year, as the state attemps to make up the deficit, more money comes into and goes out of the district.

Jones called it “governmental counting” that requires showing payments as revenue and expenditures in school district budgets.

District 9 board member Sunni Hilts said it was difficult to communicate the increased revenues and expenditures related to the PERS and TRS money paid into and out of the district to people who wanted to know why the district’s budget increases by so much ever year.

“That is so hard to justify to people,” she said. “They don’t get it, and they just see the numbers that we’ve increased the budget by so much.”

The projected budget also included about $43,500,000 in revenue from the Kenai Peninsula Borough — or about $2.5 million under the maximum amount the school district could be funded by the borough.

Administration recommended asking the borough for more money to help close the school district’s revenue and expenditures gap.

Borough Mayor Mike Navarre said it was too early in the budget process to tell how much money the borough would be giving to the school district.

“Education is a priority for the borough, it’s our biggest expenditure by far,” he said. “... We have to see what our funding sources are, where our revenues sources are and then make a determination on how we’re going to spend it.”

Navarre said the borough had funded the school district up to the cap in years previous but found the model to be unsustainable as well.

“I did an analysis when I first came into office because I obviously wanted to fully fund education,” Navarre said. “When I did the analysis, what it showed was that over a period of about four years or so, the borough’s fund balances had gone down by about $10 million and the school district’s had gone up by about $10 million. It just didn’t make much sense to have it go into their fund balances and come out of the borough’s fund balances.”

Navarre said the borough should make sure the district was spending money it had been allocated in the most efficient way.

“We have a responsibility not just to provide them with the amount of money that they ask for, we have a responsibility to look at the overall funding for the borough and make the best decision,” he said.

Navarre said he thought the district had been doing a responsible job of managing its finances.

Atwater suggested an additional $1.3 million in cuts from the district staff office, technology equipment, supplies, software, school board travel and other sources but also said the district had seen the fiscal cliff coming.

“I think we should be proud of our finance department and of our management of our finances that we haven’t arrived at this cliff sooner,” he said. “We’re not in dire straights with regards to when you compare us to other districts that are in much tighter straits.”

If funding where to “fall through” for the year, the school district would be able to continue operating.

“If everything went down the tubes and nothing happened, we would get through the next year just fine but the point I want to make is that we are at a point where we have to start cutting back and doing something differently,” Atwater said. “The revenue is just not keeping up.”